Business Loan vs. Medical Equipment Loan: Which is Best Medical Professionals?

There are several ways to finance a business undertaking. You can ask your friends or family, you can sell equity in your business, you can talk to your bank, and so on. With so many options out there, it can be confusing to decide which path to take. Even if you know that you want to borrow from a lender, you will still need to ascertain which type of loan you want to take. 

If you’re a medical professional who wants to take out a loan for medical equipment, there are two primary options. You can either opt for a Business Loan or you can opt for a specialized Medical Equipment Loan. 
In this article, we’ll cover the differences between an online Business Loan and an online Medical Equipment Loan so that you can make an informed decision. 

Purpose of the Loan 

The purpose of the loan determines the kind of loan that will be a better fit for your requirements. In most cases, the lender will want to know the intent of the loan before approving the funds.  This will help them determine the borrower with the most urgent or most useful need. This is because many loans have certain conditions for end-use. Such loans can’t be redirected to any other cause except those it’s assigned for.

This is called an end-use restriction. Lenders place end-use restrictions so that the terms and conditions of the loan fit the end-use and risk profile of the borrower. 

A Business Loan can be used for a much larger variety of purposes than a Medical Equipment Loan. 
By applying for an online Business Loan, you can do the following

• Boost your working capital, 
• Manage operational costs, 
• Purchase or maintain business equipment, 
• Market your business, 
• Restock inventory,
• Expand to other markets, 
• Hire staff,  

And so on. 

This is just an indicative list. Every lender has its list of purposes for which a Business Loan can be used. 

In contrast, a Medical Equipment Loan can only be used for buying, repairing, or maintaining medical equipment. 

This end-use restriction can be a deciding factor in whether you opt for a Business Loan or apply for an online Medical Equipment Loan. If you intend to use the proceeds of the loan for other purposes in addition to taking care of your medical equipment needs, then applying for a Business loan would be better suited for your purpose. 

Interest Rate and Other Charges 

The interest rate and other charges determine how costly the loan is. There is a huge difference between the cost of a Business Loan and the cost of a Medical Equipment Loan. This is because medical equipment is deemed to be safer credit when compared to a general Business Loan, hence lenders are comfortable charging a lower interest for them.
In general, an online Business Loan has an interest rate of between 15% - 26%. The interest rate can vary depending on the credibility of the borrower, whether the loan is secured or not, and the credit score of the borrower. 

Further, there are other charges associated with a Business Loan. These charges include a processing fee (which can be around 2% of the loan amount), pre-payment charges (if you pay the loan before the agreed-upon repayment dates), and late-payment penalties (which can be around 3% of the overdue amount per month). 
In contrast, the interest rate of an Medical Equipment Loan is much lower, within a range of 10% to 12%. 

Further, the processing fee of such a loan is also lower than that of a Business Loan. Many lenders do not charge a pre-payment fee for such loans. 
However, the late-payment fee for such loans will usually be the same as that of a Business Loan.   

Loan Amount 

The loan amount can vary widely from lender to lender. Each lender has its acceptable range. Further, the loan amount can also depend on a variety of factors such as the finances of the borrower, the ability to service the loan, the credibility of the borrower, and so on. 

In general, the loan amount sanctioned for a Medical Equipment Loan can be much higher than an ordinary Business Loan. This is because medical equipment is quite expensive and the ability of healthcare-affiliated businesses to repay the loan is generally expected to be higher. 

A Business Loan can have a loan amount that ranges from Rs.3 lakhs to Rs.50 lakhs. This is just an indicative amount. Depending on the lender, a Business Loan can be availed for a much higher or lower loan amount as well. 

In contrast, a Medical Equipment Loan can be availed for an amount between Rs.20 lakhs to Rs.3 crores. 

Hence, if you’re looking to purchase expensive medical equipment, then taking out a Medical Equipment Loan may be the only option due to the high expenses.  

Tenure of Loan 

The tenure of the loan can also vary widely depending on the lender. However, in general, the tenure of a Business Loan is shorter than that of a Medical Equipment Loan. 
The maximum tenure of a Business Loan can be around 3 years to 5 years. The tenure also depends on the loan amount. The higher the loan amount, the more time you can get to repay it. 

In contrast, a Medical Equipment Loan can have a maximum tenure of up to 7 years. 

Further, a Medical Equipment Loan can also have a principal moratorium. This means that you don’t have to start repaying the loan until a few years after you have availed of the loan. 

Comparison Between Business Loans and MEL Based on PFL Policy.

Wrapping Up 

There are several other minor differences between an online Medical Equipment Loan and an online Business Loan. You should read the terms of the loan carefully before deciding to take out a loan. Overall, the terms of a Medical Equipment Loan can be more suitable for a medical business looking to purchase, maintain, or repair, their equipment but a Business Loan can be more flexible.